Military Spending by Country

With outstanding U.S. debt fast approaching 100% of GDP and budget deficits continuing to yawn stubbornly wide, the next president and congress will have some unpleasant decisions to make. Spending will have to be cut. But from where?

Social Security and Medicare will come under debate, as will most discretionary spending. But the elephant in the room that no one wants to acknowledge is the U.S. military (see figure).

The United States currently accounts for nearly half of all world military spending. Its military budget is more than eight times that of China and fourteen that of Russia.

The United States requires a large, muscular military to defend its economic and diplomatic interests abroad. Having a powerful army and (more importantly) navy is essential to maintaining credibility. But during times of economic austerity, unpopular questions of “how big is enough” will start to be asked.

The automatic spending cuts that were part of the grand bargain between Barack Obama’s White House and the Republican-controlled House hit the military budget hard. In an election year, neither party will want to see them implemented.

But once the election is over, even the most hawkish of republicans will have to accept that sacred cows like the military will have to be touched if the United States is to get its finances under control. And with a smaller military, expect a more modest foreign policy. It’s a whole new world, dear reader.

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.